Growth of Voluntary Carbon Markets Drives Innovation

To support rapid rates of decarbonization in line with the Paris Agreement’s 1.5°C target, it’s estimated that voluntary action through carbon markets will need to increase 15-fold by 2030, and 100-fold by 2050 from 2020 levels. Thankfully the growth of voluntary carbon offset demand has helped to simultaneously reduce greenhouse gas emissions while driving market innovation. Although challenges certainly remain to enable scaling up of the market to this degree. Data from the Ecosystem Marketplace 2021 report [1] on voluntary carbon markets highlights how recent years have produced substantial growth in both traded value and volume of voluntary offsets. This has resulted in demand for carbon offsets outpacing current supply, thus motivating a rise in project registrations and issuances.

Evidence of market innovation is demonstrated through the growing number of approved project protocols listed by accredited carbon registries. Currently approved methodologies cover a broad spectrum, addressing emissions avoidance/reduction from land use practices, waste management techniques, and industrial processing, to name a few. Yet examples of novel carbon offset protocols continue to emerge as seen by studies into the potential impacts of plugging fossil fuel wells, or the production and use of biochar. These collaborative efforts to drive market innovation are facilitating an increasing degree of portfolio diversity and allowing for market expansion. Of project issuances thus far in 2021, Forestry & Land Use and Renewable Energy categories have dominated, but it remains unknown what the capacity of new carbon credits could become. It will be exciting to see the evolution of innovative approaches to further incentivize reductions of carbon in the atmosphere. Considering these developments, it remains crucial for market participants to continue ensuring transparency, credibility, and integrity throughout all project stages.

The Taskforce on Scaling Voluntary Carbon Markets reports [2] that while demand for voluntary carbon credits exceeded 90 MtCO₂e this year, we’re still far from achieving 1.5 to 2 GtCO₂e per year needed to support goals of net-zero by 2030. With a potentially record-breaking year for annual carbon market cumulative value, the prospects of increased growth through nascent channels of development appear promising, but momentum must continue to build.

News + Resources